What is a normal payment term?

[Goode Grammar]

Up until now I've always set my default payment terms to 30 days but I'm finding clients take that quite literally and send their payment 9 times out of 10 by the 30th day. I'm thinking, to expedite payment and keep a more steady cash flow going, to shorten my payment terms to 15 days. I am a freelance copywriter. What does everyone else who is a service provider set as your payment term? Is 15 days too short? TIA

[billbenson]

Under 30 days, companies often ask for a percent or two for early payment. Frequently it's worth that. I only have one or two accounts that habitually pay under 30 even when the terms are net 30. I pretty much count on 45 days for payment on a net 30.

Also, companies frequently cut checks on a specific date. That can be a day of the week or end of the month. You are pretty much at their mercy.

Some companies have very long terms. Anheuser-Busch is 180 days, take it or leave it.

But yes, 15 days is to short for most companies.

[Freelancier]

Even if you set your terms to 5 days, most companies will pay when they're ready to pay and not a moment before.

Your best bet to smooth out your cash flow is to have more work in the pipeline and more customers to pay your invoices. That is the only way I've found to lower payment risk and to ensure a steady stream of income.

[Wozcreative]

I'm a freelance graphic designer. Small/Medium sized businesses and startups pay me 50% up front and 50% balance upon final approval.
I do have one client that pays me within 5 business days, one that pays within 30 business days and one that pays me via check (so that usually is about 7 business days).

I know that I need money constantly running through my accounts so I make sure to take on more clients that will pay right away. For the most part I don't take on companies that cannot pay me right away because there's no shortage of companies that will.

BTW this maybe location based or industry based though. Most of my clients are in the toronto area (local for me). Maybe figure out who your targeting and if it's worth the wait. If its projects that are a couple hundred dollars.. do you really want to wait 30 days for that?

[Fulcrum]

90% of my customers pay in 30 days like clockwork, 1 runs $5,000 always in arrears (annoying since cheques never line up with actual invoice numbers), and the rest pay cash on delivery.

On the other side, I pay all my bills either on receipt or when the product ships to me (importing). Great for earning credit card points just need to make sure I always have enough cash available to pay things off at all times.

[tallen]

A couple of the vendors with whom one of businesses has credit accounts (for stuff rather that services) generate their monthly statements around the 25th of the month and offer a 10% discount if paid by the 10th of the following month. It's a nice discount, and we take advantage of it. I think some of our utility bills come with 15-day terms, but we are on automatic debit payment plans with all of these.

When I invoice for my professional services, my terms are always payment due upon receipt. So far, the clients I've had have been pretty prompt in paying.

[billbenson]

I didn't notice until now that the OP was a freelance copywriter. In any case, I think that this thread points out that this is going to vary all over the map depending on your industry and business model.

[Brian Altenhofel]

It depends.

Most of my clients are on 7-day terms, which is my default. Some need more time than others due to accounting practices. However, I'd say ~90% of my clients pay within *hours* regardless of the terms.

Unlike most web developers, I simply bill monthly in most cases. I do have some that place a deposit to solidly book a timeframe, and I also have others that do a non-refundable retainer.

[Freelancier]

Under 30 days, companies often ask for a percent or two for early payment. Frequently it's worth that.

I've dealt with some larger companies who -- when offered a discount for quick pay -- would take the discount and still not pay quickly. How? Well, the person keying the invoice into the system assumes that the invoice will get paid quickly and enter the discounted amount, but the person deciding which bills would get paid decides that nothing gets paid in less than 30 days. Taught me a lesson about offering a discount for quick pay. Basically companies pay when they're ready to pay. An invoice is an unsecured loan to them at zero interest rate, which is great for managing their cash flow on the backs of their (usually smaller) vendors. So the lesson I learned is to always assume you'll get paid sometime around day 30 for everything and manage your own business accordingly.